Trump’s March-In Rights Threat: Why Pharma is Rethinking Collaborations

John Covert, director in Sterne Kessler’s Biotechnology & Chemical Practice Group, recently spoke to Life Sciences Intellectual Property Review on the federal oversight, funding cuts, and patent uncertainties forcing universities, startups, and pharma companies to reassess partnership models.

The government’s threat to force institutions to license federally funded patents has pharma on edge, stoking fears that march-in rights could stall drug discoveries and diminish the talent pipeline.

Covert notes that “the political climate of the past two administrations have posed potential challenges to the development and commercialization of government-funding inventions.”

He adds that using march-in rights beyond their intended purpose is “not helpful to developing and commercializing inventions in a complicated technology area that requires the inter-dependence of many actors, including inventors, universities, investors, small business startups and big pharma.”

The National Institutes of Health (NIH) has also announced it will cut $4 billion annually by reducing “indirect” funding that supports universities, hospitals, and other institutions. The White House’s 2026 budget proposal goes further, seeking $18 billion in NIH cuts—a 40% reduction. Funding cuts, combined with stricter government oversight will most likely slow or halt new drug discoveries.

Covert cautions that the impact may take five to ten years to become clear. The long-term consequences, he says, could include “less patentable inventions, but also a reluctance for industries to exclusively license (and develop) government-funded inventions if the rights can be abrogated by the government.”

The damage could go beyond discoveries themselves, as Covert notes that it could result in less opportunities to train the next generation of scientists.

These shifts may also affect licensing dynamics. Larger companies, in particular, may gain greater leverage, pushing universities into less favorable terms—including stringent representations and warranties around Bayh-Dole compliance.

Covert highlights that the current situation is already creating caution around licensing government funded inventions. “The basic Bayh-Dole contract clauses are mandated by statute and rules. There is little a company can do to restructure these aspects of the licensing agreement,” he explains.

In this uncertain climate, experts urge pharma companies to be more vigilant when negotiating licenses with universities.

Covert stresses the importance of strong contractual protections. He suggests including representations and warranties to ensure universities are meeting Bayh-Dole reporting requirements, as well as obligations to keep companies updated on compliance steps. He also stresses that “any company negotiating a license to a government-funded invention should perform due diligence and confirm that reporting and other requirements were timely done.”

“Companies thinking about licensing also need to keep in mind the preference for substantial domestic manufacturing, as this requirement is unlikely to be waived by the current administration,” he notes.

Despite the risks, Covert cautions companies not to “shy away from licensing government-funded inventions.” “Understand the potential risks of non-compliance and march-in—they are different. Perform diligence to check for compliance to date, and communicate with the licensing officer to ensure continued compliance,” he says. Many of today’s healthcare innovations were born from federally funded research, and, as he notes, “there will continue to be opportunities to license patent applications to promising healthcare inventions.”